Affordability checks employed by payday lenders are similar to those used by credit card companies, representatives insisted as they were grilled by MPs.

Representatives from Wonga, QuickQuid and Mr Lender as well as trade bodies were questioned about business practices when they appeared before the Commons Business, Innovation and Skills Select Committee.

The industry faces a clampdown by regulators after charities accused lenders’ behaviour of being out of control.

A recent investigation by the Office of Fair Trading (OFT) found some firms’ business models appear to be based around people who cannot afford to pay their loans back on time, meaning they are forced to roll them over and the original cost balloons.

Asked about advertising stating that lenders can send cash within five or 10 minutes, Andy Lapointe, UK public affairs manager at QuickQuid, said: “That’s from approval.”

He said the process of credit checking could actually take several hours, adding: “The five minutes is indicating the time that they’re approved.”

“If you applied for a credit card, the application process would be as long as if you were applying for a short-term loan.

“The difference would be that you’d have to wait a few weeks for your credit card to come through as opposed to lenders who are able to transfer money directly.”

Henry Raine, head of regulatory and public affairs at Wonga, said that around one in 33 (3%) customers take loans out for at least 60 days, meaning interest needs to be frozen.

He said: “Wonga’s business is aiming to lend to people who can pay us back, that’s how we make money.

“The vast majority of people pay us back on time. We freeze interest after 60 days and 25% of people pay us back early.”

Mr Raine said around 3% of loans, equating to around 40,000 of Wonga’s 1.25 million customers, go to the 60-day period.

He said Wonga’s record compares favourably with the rest of the loan industry, including credit card companies and banks.

Mr Raine said: “We do everything we can to lessen the effect of bad debt.”

Asked if he thought Wonga’s charges are extortionate, he said: “No, of course we don’t accept that... With Wonga the first thing you see on the website is the amount it’s going to cost you. You choose how much to borrow, and for how long.”

Mr Raine said Wonga’s average loan is for £174 borrowed over 17 days and people are given reminders, including texts to tell them when the loan is due for repayment and telephone numbers to contact if they are having financial difficulty.

The committee hearing pre-empts the transferral of regulatory powers in the consumer credit market from the OFT to the Financial Conduct Authority (FCA). The new body, which came into being in April, has promised to strengthen protection for consumers.

To do so, it has been equipped with the power to impose unlimited fines and compel businesses to give people their money back when they have lost out due to poor treatment.

New curbs proposed by the FCA will force lenders to place “risk warnings” on their promotions and advertising, urging consumers to “think” before taking on a payday loan.

Lenders will be allowed to roll over a loan only twice and they will be able to make only two unsuccessful attempts to claw money back out of someone’s bank account under the proposed new rules, which are intended to come into force next year.

The whole industry is under investigation by the Competition Commission, which will produce a report next year.